Employment Contracts

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A successful business largely depends on its employees. By creating working contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created. At Bradford Jacobs, this is our aim, and we support companies in over a hundred countries by creating compliant and balanced labour contracts. Our team in Finland keeps track of the Finnish laws and regulations on a daily basis to be duly aware of updates that can be implemented in working contracts. By using our PEO and EOR service we can provide compliant labour contracts for employees in Finland including local benefits.

To support your plans, we made this guide including the basics of employment contracts in Finland. After reading this guide you will know everything about social security, notice periods, and the average working hours.

How Do You Hire Finland Employees?

Foreign companies hiring employees as part of their expansion plans for Finland must comply with tax and social security regulations. The framework of legislation relies on laws, statutes, and collective agreements to provide safeguards and entitlements for the workforce. In Finland, the employer-employee relationship is mainly governed by the Employment Contracts Act and the Working Hours Act. Other Acts regulate Annual Holidays, Non-discrimination, Protection of Privacy in Working Life, Collective Agreements, Pay Security and Study Leave. When hiring and drawing up employee contracts, all of these must be considered as well as any collective bargaining agreements that also set down minimum guarantees and entitlements.

Contracts in Finland are usually open-ended and can be presented in a more informal way than in some other territories. For example, they can be oral, written, or electronic and need not be in writing unless requested by either party. Contracts are typically exchanged by email with scanned documents and electronic signatures. There is no legal requirement to exchange hard copies of documentation or regarding the language used. However, they must detail essential points covering business location, employee’s place of work, the termination date of any fixed-term contract, any trial period, employee’s duties, any collective agreement, salary and payment schedule, annual holiday, notice periods and sick pay.

Employment Contracts in Finland

There are a variety of contract types in Finland, governed by the Act on Employment Contracts. The main types are:

  • Open-ended/Indefinite employment contract: The most common type of contract. Under Finnish employment law, all contracts are considered open-ended and valid until further notice.
  • Fixed-term employment contract: Employers must have justifiable reasons for offering a fixed-term contract. These include temporarily replacing a member of staff, a fixed-term project or seasonal work. If the employer cannot give a reason the contract is deemed indefinite. It is illegal to use consecutive fixed-term contracts which indicate there should have been permanent employment.
  • Trial period employment contract: This must not exceed six months from the start of work. In a fixed-term contract, the trial period cannot exceed half the term of the contract. The trial period contract can be cancelled by either party but not on grounds prohibited by legislation.
  • Regardless of contract type and whether delivered orally, written or electronically the employee should receive basic information within one month. Written details should cover such as business location, employee’s place of work, the termination date of any fixed-term contract, any trial period, employee’s duties, any collective agreement, salary and payment schedule, annual holiday, notice periods and sick pay.

Collective Agreements:

Individual employers, employer federations, trade unions and employer organizations create collective agreements to lay the framework of employment terms and conditions for employees. They generally cover specific sectors or industries.

Collective agreements are binding on employers, regardless of the employer being a member of the organization that drew up the agreement or whether the employee is a union member. However, collective agreements can provide extra benefits not covered by employment law, such as salary increases, extra holiday benefits, paid sick leave and minimum wages, as Finland has no national minimum wage.

There are countless such agreements in Finland, where collective collaboration plays a large part in the employment market. They guarantee that within a specific sector or industry all workers receive identical benefits and entitlements. There are 160 universally-binding collective agreements in Finland confirmed by the Board for the Ratification of Validity of Collective Agreements. These are binding on all employers in the relevant sector, including employers who are not members of the employers’ organization.

Additionally, central labour organizations may also introduce elements to be included in the collective agreement.

What Employment Laws exist in Finland?

The Employment Contracts Act and the Working Hours Act are the main factors governing employment in Finland, supplemented by a raft of other measures covering such areas as paid leave, sick pay, non-discrimination, and data protection. Individual sectors will also apply minimum rates for pay as there is no national minimum wage in Finland.

Collective bargaining agreements can introduce additional benefits and entitlements, but certain statutory minimums must apply to any contract. These include:

Working Hours: Under the Working Time Act, hours should be eight per day or 40 per week or an average of 40 a week over 52 weeks. Certain sectors and collective agreements allow flexible ‘period working time’ not exceeding 80 hours over two weeks or 120 hours over three weeks. Employers and employees can agree to flexi-work arrangements, but hours cannot exceed an average of 40 hours over four months.

Working breaks: These are also covered by the Working Time Act. Employers are entitled to one hour’s break after working six hours; shorter breaks must be agreed upon by both parties. There must be a minimum of 11 hours of rest between working days and an unbroken 35-hour break every seven days.

Overtime: Rates are set at 50% above basic salary for the first two hours and 100% extra for each subsequent hour.

Annual Leave: Paid annual leave is calculated between April 1 and March 31 as the credit year. Under the Annual Holidays Act, leave is two days per month for employment of fewer than 12 months. Employees who have worked for more than 12 months receive two-and-a-half days per month. Employees unable to take their full allowance due to illness or medical rehabilitation can claim additional days to a maximum of 75. There are generally 11 paid public holidays and individuals who have to work receive twice their normal pay, while collective agreements may provide further holiday and salary entitlements in lieu.

Sick Leave: This is governed by the Employment Contracts Act. Employees incapacitated through illness or injury receive their salary as sick pay from their employer for the first 10 days. Those who have worked less than one month receive 50% of their salary. After nine days the Social Insurance Institution (Kela) pays sickness benefits for up to 300 days and compensates the employer if they paid the salary.

Maternity Benefit: The Social Insurance Institution (Kela) pays an allowance for 105 working days (Monday to Saturday) from when the leave begins. Mothers are entitled to a tax-free lump sum of €170 (US$200). Maternity leave begins at the earliest 50 days before the due date or 30 days at the latest.

Paternity Leave: Leave of up to 54 days can include between one and 18 days taken simultaneously with the mother’s leave while she receives maternity or parental allowance. The balance of parental leave can be in two separate periods. The Social Insurance Institution (Kela) also pays paternity allowance.

Parental Leave: Can be taken by either parent for the full term or be shared. The Social Insurance Institution (Kela) pays an allowance for 158 days, during which parents can work part-time and receive a partial allowance accordingly.

Termination and Notice: Termination notice depends on the length of the employee’s service and can be contractually agreed upon if not already governed by collective agreements. If the employee’s contract is terminated without fault on their part, notice periods are: Up to one year’s employment – 14 days; up to four years – one month; up to eight years – two months; up to 12 years – four months; over 12 years – six months. Employees terminating employment must give 14 days’ notice if they have been working up to five years and one month for over five years.

Severance Payments: There is no statutory requirement for severance payments unless covered by collective agreements in the case of mass redundancies or the employer chooses to pay them.

Probation: Trial periods must not exceed six months from the start of work. In a fixed-term agreement, the trial period cannot exceed half the term of the fixed-term contract. The trial period contract can be cancelled by either party but not on prohibited grounds.